Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Shipping giant Maersk's ominous warning of 'dark clouds on horizon' indicates trade is slowing globally

Shipping giant Maersk's ominous warning of 'dark clouds on horizon' indicates trade is slowing globally

The shipping industry is getting rather better at responding to prevailing economic conditions than it has been at times in the past

Anyone worried that a global recession is looming will take no comfort from the trading update issued today by AP Moller-Maersk.

The Danish company, the world's biggest name in container shipping, is usually a reliable indicator of what is happening - or about to - in global trade.

And its message today was not encouraging.

'Dark clouds on the horizon'


Soren Skou, the company's chief executive, said it was clear that, following an exceptional period of trade, freight rates had peaked and had begun to normalise during the last three months. He said this was driven by both decreasing demand and easing of supply chain congestion.

Mr Skou added: "With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession - there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand."

His warning sent shares of Maersk, which more than doubled in value between the end of January last year and the middle of January this year, down by more than 7%. The company, the second largest on Denmark's blue-chip OMX 20 index after the drug-making giant Novo Nordisk, has seen its stock market valuation fall by two-fifths since it peaked on 13 January.

Mr Skou went on: "As a result of increasing inflation and economic slowdown, demand for ocean shipping began to decline in August and this was clearly observed in both rates and volumes."

He said Maersk now expected full-year contract rates to be slightly lower than it was expected earlier in the summer - largely due to volumes on east-west ocean routes seeing a 10% decline in volumes year on year.

Global slowdown


The comments from Maersk, which employs more than 80,000 people worldwide and which has a 17% share in the market for ocean-bound freight, are an ominous indication that trade is slowing globally.

Mr Skou said the company had been "anticipating normalisation" for quite some time and was ready for it.

He went on: "We are pulling back our outlook for the industry and expect global container demand to decline by 2-4% in 2022. From the global market data we can all observe, it should be clear that the risk [to that forecast] is to the downside going forward."

Patrick Jany, the chief financial officer, said that freight rates in shipment were expected to suffer a "pronounced deterioration" in the coming months.

Maersk containers onboard the container ship Hammonia Husum


Costs to come down


He said it would be prudent to assume that new contracts would be on lower terms going forward but said costs could be expected to come down as congestion at ports around the world - caused partly by Chinese COVID-related lockdowns - begins to recede. Unfortunately, he added, this would be matched by ongoing inflationary pressures.

The irony is that Maersk was reporting record quarterly results, with pre-tax profits for the three months to the end of September coming in at $9.17bn (£7.9bn), an increase of 62% on the same period last year.

It was the 16th consecutive quarter in which the company had reported a rise in earnings. During the first nine months of the year, Maersk made pre-tax profits of $24.9bn (£21.6bn), just over double what it achieved in the same period in 2021.

Sales in ocean shipping, the biggest part of the business, were up by 38% while in the land-based logistics and services arm, the next biggest division, they were up by 61% although that was partly flattered by acquisitions.

Mr Skou said the positive aspect of normalisation in shipping conditions was that global supply chains would begin to improve and would also help Maersk deliver a more reliable service in ocean shipping.

He said that shipping companies were starting to respond by taking capacity out of the market and this was likely to continue.

He added: "Every carrier will do what they think is right but I note that both in the Pacific trade and Asia-Europe trade, 15% of capacity has come out now so one could expect to see more capacity adjustment to meet demand in coming quarters - at least that would be our strategy."

The Maersk CEO said the company was not defining itself by its volumes and was not aiming to win market share in ocean shipping - rather it was looking to gain a greater share of spending from its existing customers.

He went on: "It's not half a percentage point of [extra] market share that is going to get us very excited."



Improved response


Those comments underline that the shipping industry is getting rather better at responding to prevailing economic conditions than it has been at times in the past. There was once a time when, rather than reduce capacity, shipping operators preferred to engage in futile price wars that simply resulted in a collapse in industry profits.

Signs that lessons had been learned came when, at the start of the pandemic, Maersk and others took a disciplined approach to withdraw capacity in response to an expected collapse in global trade.

In the event, the industry was pleasantly surprised, with demand surging as households subjected to COVID lockdowns spent money that they would have done on going out on consumer goods instead. That, along with previous capacity reductions and ongoing congestion in ports, means shipping containers around the world remain costlier than it did prior to the pandemic.

But it feels as if that boom is now over.

As Mr Skou put it in his concluding remarks to investors and analysts this morning: "We have a challenging year, or years, ahead of us as the world faces a combination of geopolitical uncertainty and inflationary pressure that we have not seen for decades."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×